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If you managed to make use of your Individual Savings Account (ISA) allowance in the last tax year, then you will be pleased to know that as of 6th April, you have another £7,200 of potential tax free investments in which you can deposit into ISAs.

If you didn’t manage to use up last years ISA allowance don’t worry, just deposit your savings into an account as soon as possible and benefit from tax free returns on your investment.

If you are unfamiliar with ISAs, it’s worth checking out how they work, as you could be paying unnecessary taxes on the interest you accumulate through savings.

ISAs were set up by the government to encourage people to save, giving us a tax-free incentive. Everyone aged 16 or over is eligible to the £7,200 yearly tax free allowance, which can be used for both investment and cash ISAs. You can use as much or as little of the allowance as you wish, using up to the full £7,200 in an investment ISA, or up to £3,600 in a cash ISA, and the rest in an investment ISA.

Cash ISAs are very similar to savings accounts, with some providers offering higher rates for locking your savings away into a fixed rate ISA, while investment ISAs are more rare within the banking sector, but are beginning to come increasingly popular, as these provide the potential to earn higher returns on your investment. It is important to remember that all stocks and shares dealings carry some kind of risks, so as well as making great returns, there is also the possibility that you could make a loss.

There are a number of ways your account can be run, from where and when your interest is paid, to how often you will make deposits, and the level of access to your funds. These are all determined by the ISA account you choose. It’s up to you how often you want to make deposits, so you could make a one off lump sum investment (up to your ISA allowance) at the start of each tax year, or you may wish to spread your allowance out over the course of the year, making monthly deposits. You can also choose how and when you would like your interest to be paid based on the account you choose, with monthly annually payments added either to your balance or into a separate account.

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